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Direxion Daily Financial Bear 3X ETF Message Board

  • sunildper sunildper Mar 17, 2009 4:59 PM Flag

    Barrons : options market is expecting the financials to decline

    Saw this on Barrons today

    THE BROKEN FINANCIAL SECTOR may one day lead the stock market away from its troubles, but the options market isn't expecting that to happen anytime soon.

    Despite last week's nascent bullishness among the options of many top financial stocks, it seems as if someone turned a switch, or sent out a group e-mail to hordes of sophisticated investors, telling them to quickly establish positions that will increase in value in anticipation that financial-stock prices will decline.

    The change in sentiment is particularly jarring as it occurs ahead of this week's meeting of the Federal Reserve's Federal Open Market Committee, which controls interest rates. The meeting concludes Wednesday, offering one of the week's major trading events.

    What a difference a few days make.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • stop denial, 20s a sure thing on that widowmaker huhahhaa

    • I am working on an analysis of this right now - give me a few minutes and I'll update everyone on IF this is TRUE or a FALSE FLAG.

      I.E. if everyone at Barrons is so investment savvy - wouldn't they all be millionaires and not working at Barrons?

    • If so why going down still and when will tide turn for the shorts?

    • sorry.. report continued below..

      Late last week, financial-sector trading was mostly bullish as investors took sustenance from representations made by Bank of America (ticker: BAC), Citigroup (C) and JPMorgan Chase (JPM) that the banks were seeing profits.

      This led to a quick, broad stock rally, and lots of talk among traders that the financial sector, which led the market into its current abyss, would lead the market out. But all it took was a weekend of reflection for all the latent doubts about the sustainability of last week's financial-sector rally to turn into big, bearish bets.

      The bulls became bears and are buying enormous amounts of April downside puts on the Select Sector Financial SPDR (XLF), which is comprised of major financial stocks including, Goldman Sachs (GS), MetLife (MET), JPMorgan, Morgan Stanley (MS), Wells Fargo (WFC) and U.S. Bancorp (USB).

      With XLF trading around $8, investors are buying April 4, 5 and 6 puts. On Monday, the April 5 puts traded more than 60,000 contracts, indicating widespread expectations that XLF could fall some 40% and set a new 52-week low.

      Among the most dramatic bets against the financials involved Citigroup, whose "leaked memo heard 'round the world" largely instigated last week's broad-based stock rally.

      Investors have sold more than 70,000 of Citigroup's Sept. 3 call. The contracts essentially bet that Citigroup's $2.33 stock will not trade above $3 by September.

      The mood is also darkening beyond Wall Street. A CNN/Opinion Research survey released Tuesday revealed that a growing number of Americans think another Great Depression will occur within the next year.

      In December, 38% of people surveyed said a depression similar to the 1930s was likely in the next year. The number has since increased to 45%.

      Only one in 10 of the people surveyed think a recovery is likely within a year, which is at odds with recent representations from U.S. policy makers. In fact, one in five think it will take longer than four years for the country to normalize.

      The poll was conducted Thursday through Sunday, with 1,019 adult Americans questioned by telephone. The survey's sampling error was plus or minus three percentage points.

      Many things are open to debate, especially investor sentiment. But it's hard to argue with this: Paper profits don't exist until they are converted into cold, hard cash

 
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